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SBA XXXX Loan - Lender Gross Negligence and Loan Fraud Complaint ( Banc of California Loan Number XXXX ) XX/XX/XXXX My name is XXXX XXXX XXXX and I purchased an established on-line XXXX Store ( XXXX XXXX XXXX XXXX ) from XXXX XXXX XXXX ( XXXX ), of XXXX Iowa, ( Seller ) and financed it with an SBA Loan through the Banc of California ( Banc ). I found the business using a reputable Business Broker, XXXX XXXX XXXX , XXXX, and I used the Banc of California ( Banc ) to finance the business because XXXX XXXX XXXX , XXXX, recommended them as an established SBA " Preferred Lender ''. The Seller ran the business as XXXX XXXX , XXXX, XXXX XXXX XXXX XXXX XXXX, which was his XXXX Store name. I simply changed the Parent Company name to XXXX XXXX XXXX, XXXX XXXX XXXX XXXX XXXX. My total loan amount was {>= $1,000,000}, ( Banc Loan Number XXXX ). The loan closed on XX/XX/XXXX.
After purchasing the business, I discovered numerous fabrications that the Seller ( XXXX XXXX XXXX ) had told me about the business, including, that the Seller had submitted fraudulent financial documents on this business to myself and the Banc of California and SBA Underwriters. These were financial discrepancies that SHOULD HAVE been caught in Loan Underwriting, prior to the loans approval. In short, this loan SHOULD NEVER have been approved. It is a TOTAL mystery to me how the Bank and the SBA approved this loan with the significant Red Flags from the financial documents, which are presented below and fully documented with the accompanying attachments.
Specifically, the Sellers P & L Statements ( XXXX XXXX , XXXX ) for years XX/XX/XXXX, XX/XX/XXXX and XX/XX/XXXX ( Attachments 1-3 ), totaled {$290000.00} LESS than the XXXX 1099 's ( Attachments 4-6 ), that he supplied directly to the Banc of California. In addition to the above Ridiculously Huge discrepancy, I also discovered in XX/XX/XXXX, that his XXXX 1099 is {$27000.00} More than the Gross Sales reported on his XX/XX/XXXX Tax Return ( Attachment 7 ). This later discrepancy alone, in my opinion, SHOULD HAVE been enough of a Red Flag to trigger further financial scrutiny.
These HUGE RED FLAGS and Blatant Financial Discrepancies were never brought to my attention by the Banc of California. While the Seller submitted various financial documents, i.e., his Balance Sheets , P & L Statements and truncated Tax Returns to me as the Buyer, he was required to submit his complete Tax Returns and 1099 's directly to the Banc. At the time, I was relying on the Banc of California as a " Preferred Lender '' and the SBA, to thoroughly review the Sellers Financial documents. However, the Banc DID NOT inform me, or the CPA that I hired for the Due Diligence process about either of these discrepancies. To the best of my knowledge, they also DID NOT inform the Business Broker or challenge the Seller XXXX XXXX XXXX, about these Huge Discrepancies.
NONE of the above financial discrepancies were known by me until AFTER the business started failing.
Long story short, I operated the business the best I could for two ( 2 ) years, but was forced to inform the Banc of California, in the last week of XX/XX/XXXX, that I could no longer pay the {$18000.00} monthly payment ( {$220000.00} per year ). Shortly afterwards, I fully documented and supplied the Banc with a detailed report and XXXX spreadsheet showing the extent of the Seller 's fraud ( XXXX XXXX XXXX - Proof of Seller Fraud, Dated XX/XX/XXXX - Attachment 8 ), which I had discovered while trying to analyze the Store 's financial failure. Two ( 2 ) of these major findings are presented below.
After purchasing the XXXX Store, I was able to access the store records in XXXX Seller Central and was able to capture the entire three ( 3 ) year period (XX/XX/XXXX-XX/XX/XXXX ) of income for XXXX XXXX , XXXX, using the weekly XXXX Payment Invoices. These weekly Invoices were entered into an XXXX Spreadsheet and totaled line by line. Given the large discrepancies that were discovered, it now appears to me, that the seller had more than one XXXX Store, though he represented the Sales as being ALL from one store. After adding up the weekly XXXX Payment Invoices for years XX/XX/XXXX-XX/XX/XXXX ( Attachments 9-11 ), the following was discovered : XXXX Weekly Payment Invoices ( Attach. 9-11 ) vs. XXXX XXXX XXXX Statements XXXX XXXX Supplied ( Attach. 1-3 ) XXXX - Invoices totaled {>= $1,000,000} vs. XXXX XXXX XXXX XXXX - {>= $1,000,000} = {$100000.00} MORE than the Store made XXXX - Invoices totaled {>= $1,000,000} vs. XXXX XXXX XXXX XXXX - {>= $1,000,000} = {$130000.00} MORE than the Store made XXXX - Invoices totaled {>= $1,000,000} vs. XXXX XXXX XXXX XXXX - {>= $1,000,000} = {$18000.00} MORE than the Store made Total = {$250000.00} - Seller 's XXXX XXXX XXXX Statements were $ XXXX More than the Store made.
XXXX Weekly Payment Invoices ( Attach. 9-11 ) vs. XXXX 1099 's for XXXX XXXX , XXXX ( Attach. 4-6 ) XXXX - Invoices totaled {>= $1,000,000} vs. XXXX 1099 - {>= $1,000,000} = {$180000.00} MORE than the Store made XXXX - Invoices totaled {>= $1,000,000} vs. XXXX 1099 - {>= $1,000,000} = {$200000.00} MORE than the Store made XXXX - Invoices totaled {>= $1,000,000} vs. XXXX 1099 - {>= $1,000,000} = {$160000.00} MORE than the Store made Total = {$550000.00} - Seller 's XXXX 1099 's were $ XXXX More than the Store made.
The above two ( 2 ) graphics clearly illustrate the extent of the Sellers Financial Fraud which was discovered After the business was purchased.
However, given the pre-Closing facts that were previously covered in Paragraph 3 above, it is my position that this SBA Loan SHOULD NEVER have been approved. Had the Banc of California Underwriter, who incidentally is no longer with the bank, and the SBA Underwriter simply done their jobs, then the Seller, XXXX XXXX XXXX would not have been able to DEFRAUD and SWINDLE me out of my Life Savings.
On XX/XX/XXXX, it will be ten ( 11 ) months since I informed the bank that I was defaulting on the loan. It has now become increasingly apparent that the Banc of Cal is stalling on completing the SBA foreclosure process and exposing the facts in this case. The Banc has had over 10 Months to review and assess the Financial Documents and Underwriting details of this Loan. They know that their Loan Underwriter was negligent and DID NOT, to say the least, follow basic, prudent, financial industry practices. Further, I just can't imagine how this loan was approved by the SBA - unless collusion or additional Fraud or Falsification was involved.
After patiently waiting over 10 Months for the Banc of California to take action, I feel I must file this formal Complaint. I feel that the Banc is stalling on the resolution of this matter, at my further expense, which further proves their bad intention, their guilt and their initial and now, ongoing negligence. The Banc has done Nothing over the last 10 months to foreclose on my Business Loan or to settle this account with me - other than to continue to raise my interest rate ( the 8th time ), and to continue to charge me interest and penalties on my loan. As of XX/XX/XXXX, Past Due, Late Fees and Penalties total = {$190000.00}, plus the Principal Balance total = {>= $1,000,000}. There have been no legal proceedings filed, they avoid/ignore contact from me since XX/XX/XXXX, they avoid/ignore repeated contact and Certified Letters from my creditors ( public warehouses ) and in my opinion, have been further negligent in properly securing the remaining business assets ( approx {$300000.00} of inventory in multiple public warehouses ).
In addition to the Banc of California 's SBA loan, I have a separate Promissory Note to the Seller, XXXX XXXX XXXX, ( XXXX ), of XXXX Iowa, in the amount of {$180000.00}, which was his 10 % share of the SBA Loan Requirements. This is a seven ( 7 ) year, 6 % fixed interest note, with an additional two ( 2 ) year no-payment, interest-free, grace period. The two-year grace period is over and this note became due and payable on XX/XX/XXXX. When the Seller, XXXX XXXX XXXX contacted me in XX/XX/XXXX about paying him, I informed him that I had discovered his fraud, that the XXXX Store had not made as much as his XXXX XXXX XXXX Statements stated and that his XXXX 1099 's Did Not match the Store 's income. When confronted, he denied ever having more than one XXXX Store. I told him that 1 ) I was not paying him another dime, 2 ) I was going to be forced to file Business and then Personal Bankruptcy and 3 ) He would being hearing from either the Banc of California Attorney or the SBA Attorney. I have not heard from him since.
I NEED HELP resolving this issue with the Bank of California and dissolving/settling these two ( 2 ) Promissory Notes. As stated earlier, this SBA Loan should have NEVER been approved! I put my life savings into this business by self-directing my XXXX, as my 15 % share of the purchase to meet the SBA Loan Requirements. I have approximately {$430000.00} invested in this business and feel that I was SCAMMED by the Seller, XXXX XXXX XXXX, and the Banc of California overlooked the financial discrepancies and Red Flags, due to GREED and/or GROSS NEGLIGENCE.
Beside the fact that I was scammed by a fraudulent Seller, I obviously overpaid for this business and due to the ridiculously high note of {$18000.00} per month, I was never able to make enough money in the business to pay myself a salary. ALL of the income went to paying the monthly note or back into the business to pay for inventory or expenses. I have not taken one dime of salary since purchasing the business in XX/XX/XXXX and I was forced to take my Pension, from a previous employer, earlier than planned, just to survive. I have been living on a very small pension that nets me {$1900.00} a month, for over three ( 3 ) years now. I am literally " living on fumes '' and DO NOT have the resources to force the Banc of California to settle this matter OR to fight the Seller, should he decide to try to collect on his Promissory Note.
I have been totally transparent with the Banc of California and have told them I would help in ANY way possible to resolve this issue. As soon as it was discovered and documented, I sent them, in good faith, the Report and lengthy Spread Sheets that I compiled, using the weekly XXXX Payment Invoices, that exposes the full extent of the Seller 's fraud ( XXXX XXXX XXXX - Proof of Seller Fraud, Dated XX/XX/XXXX - Attachment 8 ). However, the Banc of California continues to stall and delay the resolution of this matter. They know I'm living on {$1900.00} per month and they know I don't have the means to take any action OR any additional resources for the Banc to plunder. It is my position that they are stalling, they are taking advantage of my situation and they have no intention of settling this matter anytime soon or " Doing the Right Thing '', due to their fear of exposing their negligence, exposing their liability, losing their SBA Loan Guarantee and the possible loss of their SBA " Preferred Lender '' status.
Below is my assigned contact at the Banc of California : Mr. XXXX XXXX VP, Special Assets Manager - SBA XXXX XXXX XXXX XXXX XXXX XXXX, Ca., XXXX ( XXXX ) XXXX XXXX Please Help! I am available to discuss this matter, provide additional details or answer question at ANY time.
Best Regards, XXXX XXXX XXXX, XXXX XXXX XXXX XXXX, XXXX XXXX XXXX XXXX XXXX ( XXXX Store ) XXXX XXXX XXXX XXXX, XXXX, XXXX XXXX ( XXXX ) XXXX wk ( XXXX ) XXXX cell Attachments : 1 ) XXXX XXXX XXXX XXXX Statements XXXX XXXX XXXX Supplied for Loan ( XXXX XXXX , XXXX ) 2 ) XXXX XXXX XXXX XXXX Statements XXXX XXXX XXXX Supplied for Loan ( XXXX XXXX , XXXX ) 3 ) XXXX XXXX XXXX XXXX Statements XXXX XXXX XXXX Supplied for Loan ( XXXX XXXX , XXXX ) 4 ) XXXX XXXX 1099 's for XXXX XXXX , XXXX 5 ) XXXX XXXX XXXX099 's for XXXX XXXX , XXXX 6 ) XXXX XXXX 1099 's for XXXX XXXX , XXXX 7 ) XXXX Tax Return Showing Gross Sales - XXXX XXXX , XXXX 8 ) Spreadsheet XXXX XXXX XXXX - Proof of Seller Fraud, using Weekly Payment Invoices 9 ) XXXX XXXX Weekly Payment Invoices ( XXXX XXXX , XXXX ) 10 ) XXXX XXXX Weekly Payment Invoices ( XXXX XXXX , XXXX ) 11 ) XXXX XXXX Weekly Payment Invoices ( XXXX XXXX , XXXX )
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